When most people think of Mongolia, Genghis Khan is among the first things that come to mind. That and cold barren wasteland containing more livestock than humans. But now, Mongolia is becoming known for something else - foreign investment.

Seasoned overseas property investors know the time to invest in a housing market is before the rush. This fact means that some emerging markets may have not quite developed in terms of infrastructure. When economic indications show that improvements are on its way coupled with demand for housing investors need to sit up and pay attention. Profits are made on the purchase price and buying real estate before the demand can be a rewarding business.

The continuing economic growth in China has finally reached Mongolia where, the economy grew over 10% in 2004. Solid economic growth is expected over the next few years, especially in the mining industry, which accounted for 12% of Mongolia's GDP in 2004.

The potential for growth over time is great, as the housing market has not caught up with demand. Roughly half of the Mongolians who live in the capital city of Ulan Bator still live in traditional nomadic dwelling called ger. And despite building 3,500 units last year, there is a shortage of residential units available.

Between the influx of foreign personnel and the demands of the native population, it is unlikely that the housing market will suffer from oversupply of units anytime soon. Residential development is not occurring that quickly, and the market has not become a focus for foreign investment. And since demand will almost certainly continue to outstrip development over the next few years, returns on invest will probably remain solid over that time.

Average rental prices are also solid, allowing foreign investors a quick return on investment properties which usually generate positive income equal to a considerable percentage of the total investment. Luxury developments rent at about US$900 at the low end and may go as high as US$4,000.

This means that opportunities for foreign investment in and development of residential units could prove to be lucrative over the long haul. And in fact, capital growth of property prices and strong rental returns has begun to draw foreign investors from Britain. The Times newspaper from the UK reports that high property costs at home are encouraging investors to look abroad for better returns on their investments. And some of those investors are looking at countries such as Mongolia.

While this particular market may not be for everyone, investors who have some money they can use for higher-risk investments may wish to consider the Mongolian housing market for investing in residential development. But leave the goats at home.